The foreign exchange market is largely unregulated and, recently, evidence of collusion among banks handling foreign exchange trading has emerged. Collusion among banks, or individuals, may lead to the fixing and manipulation of foreign exchange benchmark rates in a manner that takes advantage of clients participating in the foreign exchange market. In a typical foreign exchange scenario, a client may submit an order to be placed using benchmark rates (e.g., the WM/Reuters® rate), which may be set multiple times daily. However, the benchmark rate is not yet set when orders are placed. Since banks, or individuals, may know of positions prior to the benchmark rate being fixed, they have the opportunity to collude on the orders in a direction that is advantageous to the bank.
To avoid such collusion and rate manipulation, it may be advantageous to use a foreign exchange trading system that limits the knowledge of positions prior to a daily benchmark rate being set. By limiting the knowledge of positions to banks and individuals, the opportunity to collude when setting a benchmark rate may be diminished.